Can You Claim Gas on Your Taxes?
Yes, if you use your vehicle for work-related purposes, you can claim gas expenses on your income tax return. But did you know gas is just one of many deductible vehicle-related costs? From maintenance to insurance, there are multiple ways to maximize your tax savings.
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How to Claim Gas Expenses
To ensure you claim the correct amount, follow these steps:
1. Save Receipts
Keep all receipts for gasoline, propane, or oil purchases. These receipts must be retained for six years after the relevant tax year.
2. Record Odometer Readings
Log the odometer reading at the start and end of the year. If you change vehicles, note the odometer readings and transaction dates for each vehicle.
3. Maintain Accurate Trip Records
Documents for every business trip with details such as the date, destination, purpose, and distance covered. These records are crucial to calculating the percentage of your vehicle use dedicated to business activities.
4. Choose the Right Mileage Claim Method
The CRA allows two methods for claiming mileage:
| Method | Description |
|---|---|
| Full Logbook | Track every business trip for the entire year. Include date, purpose, destination, and kilometres driven. |
| Simplified Logbook | Use a full logbook from a base year and track only three months of mileage annually to calculate usage. |
Claiming Gas as a Self-Employed Individual
As a self-employed person, you can deduct gas expenses based on your business use percentage.
Steps to Claim Gas Expenses
- Determine Business Use Percentage
Calculate the proportion of total kilometres driven for business purposes.
Example: If you drove 15,000 km in total and 7,500 km for business, your business use percentage is 50%. - Apply the Percentage to Gas Expenses
Multiply the business use percentage by your total gas expenses.
Example: If your gas costs $2,500, you can claim 50% × $2,500 = $1,250. - File Your Claim
Enter your gas expenses under Line 9281 (Motor Vehicle Expenses) on Form T2125 (Statement of Business or Professional Activities).
Claiming Gas as an Employee
If you use a personal vehicle for work, you can claim gas expenses in two ways:
1. Per-Kilometre Rate
The CRA provides standard tax-exempt mileage rates:
- Provinces: $0.70 for the first 5,000 km; $0.64 for additional km
- Territories: $0.74 for the first 5,000 km; $0.68 for additional km
Example:
Emily drove 6,000 km for work in Ontario:
- First 5,000 km × $0.70 = $3,500
- Remaining 1,000 km × $0.64 = $640
- Total reimbursement: $4,140
2. Flat-Rate Vehicle Allowance
If your employer provides a flat-rate vehicle allowance included in your income, you can claim actual expenses instead. Ensure the following conditions are met:
- Your employment requires work away from the main office.
- Your contract specifies covering your own vehicle expenses.
- You receive Form T2200 (Declaration of Conditions of Employment) from your employer.
Use Form T777 (Statement of Employment Expenses) to claim gas costs.
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Other Deductible Vehicle Expenses
Along with gas, you can deduct the following costs:
- License and Registration Fees: Annual costs for vehicle registration and licensing.
- Maintenance and Repairs: Routine maintenance (oil changes, tire rotations) and unexpected repairs.
- Parking Fees: Deduct parking fees directly related to business activities.
- Insurance Costs: Claim the business-use portion of your insurance premium.
- Leasing Expenses: Deduct lease payments based on business use (Line 9281 for self-employed; Line 27 for employees).
- Electricity for Zero-Emission Vehicles (ZEVs): Claim the cost of charging electric vehicles.
- Interest on Vehicle Loans: Deduct the business-use portion of interest paid on a loan for your vehicle.
- Capital Cost Allowance (CCA): Deduct vehicle depreciation over time based on CRA rules.
How Vehicle Type Affects Deductions
Different vehicle categories have unique deduction rules:
1. Motor Vehicles
Includes trucks, vans, and some SUVs. Deduct all eligible expenses based on business use percentage.
2. Passenger Vehicles
Designed to carry up to eight people. Subject to limits on CCA, interest, and lease expenses.
3. Zero-Emission Vehicles (ZEVs)
Eligible for higher CCA rates and deductions for charging costs.
Keep Proper Records
Whether you’re an employee or self-employed, meticulous records are vital. These include:
- Odometer readings at the start and end of the year
- Receipts for gas and other expenses
- Logbooks documenting business trips
Maintain these records for six years to comply with CRA regulations.
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Maximize Your Tax Savings
Claiming gas and vehicle expenses can significantly reduce your taxable income. Ensure you:
- Choose the most suitable mileage tracking method.
- Keep detailed records to support your claims.
- Consult a tax professional for tailored advice.
By following these guidelines, you’ll maximize your tax deductions and avoid potential audits.
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